Tuesday, December 11, 2012

Five months ago I commented on a RIM submission to the ITC in the context of standard-essential patents and felt that it reflected a lack of confidence on RIM's part in the strength of its own non-SEPs. RIM has a limited number of SEPs and isn't really an SEP powerhouse like Qualcomm, so it would normally be a company that should be interested in a framework that allows reasonably strong enforcement of non-SEPS but prevents abuse of SEPs.

In the meantime, RIM's position has become even worse. Worse from a policy point of view and worse in terms of what RIM's policy positions suggest about the company's faith in its non-SEPs. In a letter dated November 30, 2012 the struggling BlackBerry maker comments on a couple of questions raised by the ITC in connection with the investigation of Samsung's complaint against Apple. A preliminary ruling didn't identify any violation, but the initial determination is under review and there's considerable risk to Apple that a wireless SEP could ultimately be deemed infringed, which is why FRAND issues could once again be outcome-determinative. The ITC review is going to address multiple questions. The two questions RIM (and other stakeholders such as Google) chose to comment on are whether SEP holders should be able to win import bans despite a FRAND pledge and by what criteria the ITC should evaluate the reasonableness of a royalty demand.

Just like five months ago, RIM's primary objective is to argue that FRAND-pledged SEPs shouldn't be treated differently from non-SEPs. In its July letter RIM already expressed the view that all patents are "part of the larger patent landscape related to smartphones" and defined as "implementation patents" any "patents that are needed to bring a commercially viable product to the marketplace, but are not an inherent part of a standard's technical specifications". Other than arguing that implementation patents "do not competitively differentiate the smartphone in the marketplace but instead instead include the features that consumers would expect to find in any smartphone they would be willing to purchase", RIM did not offer a delineation. And it doesn't want to: the whole plan is to muddy the water and blur the lines in hopes of this resulting in a landscape in which any SEP holder will be able to fend off any IP infringement claims by creating a situation of mutually assured destruction.

The latest letter goes beyond the previous one by now arguing that "there are circumstances in which a defensive injunction threat by an SEP holder is procompetitive (and thus in compliance with a FRAND undertaking) -- and the denial of the ability to make such a threat is anticompetitive (and thus at odds with the FRAND undertaking)".

This is an outlier position. Most of the true innovators in this industry are against SEP abuse and agree that the availability of injunctions based on FRAND-pledged SEPs opens the door to massive abuse and creates circumstances under which the outcome of negotiations will hardly ever be FRAND. And there's a minority of industry players who want to be able to enforce their SEPs aggressively. The members of that minority aren't all equally abusive in their intentions, but what they have in common is that they're more interested in maximizing the leverage they can get from their SEPs than in a overall healthy framework. RIM now positions itself at the most radical end of the spectrum because it openly admits that it wants to (ab)use SEPs in order to get away with infringement of other companies' non-SEPs.

Samsung and Google (Motorola) want the same thing (in their dealings with Apple as well as in Google's dispute with Microsoft): maximum leverage from SEPs in order to address non-SEP infringement issues. But unlike RIM, those companies (who may be more sophisticated and get better advice) at least try to maintain the appearance of keeping SEP and non-SEP issues separate. They always say that they're willing to grant a cash-only SEP license without insisting on a broader cross-licensing involving non-SEPs. They don't really mean it, but at least they say so. What they really want is a situation in which non-SEP holders will come to them and, at the threat of or under immediate pressure from a standards-based injunction, offer a broader cross-license involving SEPs as well as non-SEPs. It's fine to do those deals, and it's fine to make such offers, but if a patent holder doesn't want to make his non-SEPs part of the deal, there must be a cash-only option. Samsung and Google (Motorola) offer a cash-only option on terms so prohibitive that no one in his right mind would ever accept them, but at least they acknowledge that after making a promise to license your patents on FRAND terms you can't demand reciprocity with respect to non-SEPs that aren't subject to any FRAND licensing promise.

Samsung and Google's (Motorola's) strategy is to argue that someone's refusal to accede to their allegedly FRAND royalty demands is so outrageous that an exception must be made and an SEP injunction must be available. But they would never argue that such injunctions are for the greater good because they will force a non-SEP holder into a cross-license agreement with low royalties (or no royalties at all).

RIM's policy initiative is ill-conceived for at least four reasons:

By arguing that SEP injunctions can be "procompetitive" (as opposed to merely arguing, as Samsung and Motorola do, that they are needed under exceptional circumstances), RIM positions itself far outside of the industry-wide consensus on SEP enforcement. There's also a clear consensus in antitrust law that demanding a license to one thing by threatening to shut down someone's products through abusive enforcement of other rights constitutes illegal tying (of business terms).

Should RIM ever carry out the strategy it outlines in its public letters (enforcing SEPs in order to get leverage in a dispute over someone else's non-SEPs), those statements will be held against RIM and will impair its ability to employ the Samsung/Motorola tactics of arguing that a given case represents an exceptional situation in which an SEP injunction should be available despite a former FRAND pledge.

RIM is not going to get support for its theory of a "defensive injunctive threat by an SEP holder [defending himself against non-SEP royalty demands]" because its proposal is, wholly apart from being at odds with any reasonable understanding of FRAND and any reasonable application of competition rules, not workable. What RIM wants is for the courts (and antitrust regulators) to evaluate an overall cross-licensing negotiation situation between two companies. It's difficult enough to evaluate SEPs and, if necessary, determine FRAND royalty rates for them. But once the question becomes one of companies' overall patent licensing and enforcement conduct, courts and regulators would have to look into a combination of clear antitrust issues (SEP abuse) and overall business issues (reasonableness in other patent dealings) in order to form an opinion or render a judgment on whether a particular company, in a particular situation, should be allowed to seek SEP-based injunctions because of some SEP-unrelated circumstances. I can't imagine any court or regulator would ever want to inflate the problem.

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Florian Mueller is an app developer who used to be an award-winning intellectual property activist. His 30 years of software industry expertise span different market segments (games, education, productivity and infrastructure software), diverse business models, and technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof, except that he is long AAPL.) He is now developing games for smartphones and tablet computers.